No-Deal Brexit has been avoided. On Christmas Eve 2020, the UK and the EU struck a last-minute trade agreement to avoid disruptions threatening to prolong the pandemic-driven economic downturn affecting both the EU and the UK. Despite the two blocs agreeing to a deal, future risks remain. The absence of a transition period after the deal was signed means that disruptions could not be completely avoided. In the years ahead, EU-UK trade will continue to be at the centre of discussion.
The UK economy is expected to contract by 11.3% in real terms in 2020 (much deeper than the 4.2% contraction in the 2008-2009 recession). The economy will start to recover in 2021, with real GDP growing by around 4.0% in the most likely pandemic scenario. With a free trade agreement signed, the uncertainty surrounding the country subsided considerably which could boost investments once the pandemic slows.
The FTA between the UK and the EU did not include tariff-free cross-border exports of financial services between the two parties. This has now become a perk solely enjoyed by the remaining 27 EU members, threatening London’s dominance.
Between 2019 and 2024, the number of adults with net wealth of less than USD20,000 is expected to rise by 15.9%, but their mean wealth is set to fall by 15.1% in real terms to USD2,954 per capita in 2024. The expansion of the population at the bottom of the UK wealth distribution is a direct consequence of the decline of the middle segment, as people exit the middle segment to enter the bottom wealth segment.
Large retailers, such as John Lewis, have halted sales to Northern Ireland over confusion, to become compliant with the new regulations, while MAC Cosmetics UK has warned of customs delays in Ireland. With large businesses struggling to align with the latest regulations, it is likely smaller businesses will have fewer resources to navigate the 12-month grace period, limiting these players’ exports to the EU.
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